Exam 4: Economic Efficiency, Government Price Setting, and Taxes

Figure 4-5 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-5.Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments.What is the value of the portion of consumer surplus transferred to producers as a result of the price floor?

The actual division of the burden of a tax between buyers and sellers in a market is called

Table 4-6 -Refer to Table 4-6.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of consumer surplus?

Figure 4-5 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-5.What is the value of producer surplus after the imposition of the ceiling?

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

Figure 4-6 Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. -Refer to Figure 4-6.What is the area that represents producer surplus after the imposition of the price floor?

Marginal cost is the additional cost to a firm of producing one more unit of a good or service.

Table 4-1 -Refer to Table 4-1.The table above lists the highest prices three consumers, Tom, Dick, and Harriet, are willing to pay for a short-sleeved polo shirt.If the price of one of the shirts is $28 dollars,

Consumers are willing to purchase a product up to the point where

If the market price is at equilibrium, the producer surplus is minimized.

Economic efficiency in a competitive market is achieved when

The sum of consumer surplus and producer surplus is called economic surplus.

Economic efficiency is a market outcome in which the marginal benefit to consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.

Table 4-5 Table 4-5 above contains information about the corn market. Answer the following questions based on this table. -Refer to Table 4-5.An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop.Suppose the federal government sets a price floor for corn at $12 per bushel. a.What is the amount of shortage or surplus in the corn market as result of the price floor? b.If the government agrees to purchase any surplus output at $12, how much will it cost the government? c.If the government buys all of the farmers' output at the floor price, how many bushels of corn will it have to purchase and how much will it cost the government? d.Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get.Under this scheme, what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale? e.In this problem we have considered two government schemes: (1)a price floor is established and the government purchases any excess output and (2)the government buys all the farmers' output at the floor price and resells at whatever price it can get.Which scheme will taxpayers prefer? f.Consider again the two schemes.Which scheme will the farmers prefer? g.Consider again the two schemes.Which scheme will corn buyers prefer?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $1.00, what is the maximum number of burritos that Arnold will buy?

The government proposes a tax on imported champagne.Buyers will bear the entire burden of the tax if the

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.Arnold's marginal benefit from consuming the fourth burrito is

Figure 4-8 Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. -Refer to Figure 4-8.For each unit sold, the price sellers receive after the tax (net of tax)is

Which of the following statements best describes the concept of consumer surplus?

Table 4-7 -Refer to Table 4-7.The equations above describe the demand and supply for Bubba's Fried Jellybeans.The equilibrium price and quantity for Bubba's Fried Jellybeans are $40 and 5 thousand units.What is the value of economic surplus in this market?